Before Disrupting Healthcare

1. PREFACE

1.1. About This Book

Disrupt. One can find that word increasingly associated with healthcare, surfacing frequently in conference panels, hackathons, product descriptions, and media stories.

Picture a mind-numbing market with high barriers to entry, spiraling costs, long sales cycles, and complex regulations. Then imagine tiny sparks of innovation that are disrupting the status quo and transforming everything for the better. What’s not to like in that vision?

Regrettably, it’s not happening that way. Technocrats have arrived at the gates of healthcare, to be sure. The last decade has seen an unmistakable surge of visionary entrepreneurs hacking away at issues related to health. With $4.5B invested in digital health companies in 2015, the venture capital ecosystem also seems equally enthusiastic. But real progress has been slow, almost imperceptible—more like a Darwinian evolution rather than some radical, game-changing disruption.

You may wonder why. It’s not because the entrepreneurial wave lacks the required talent or commitment. Many have performed exceptional feats of wizardry elsewhere, overturning the status quo and creating new paradigms. But when it comes to health, big names have floundered. For example, consider the missteps of Google Health (introduced in 2008 and cancelled in 2011), Revolution Health (founded in 2005 by AOL’s ex-CEO Steve Case and shut down in 2010), Bosch Healthcare (created in 2008 and closed shop in 2015) and GE Healthcare IT (exited the enterprise Electronic Health Records market in 2015). Countless smaller startups have failed entirely or captured only an insignificant fraction of the addressable market.

There is an important difference between healthcare and other industries: Its commercial nature is entangled with personal, visceral emotions about life and death. To disrupt healthcare, incoming entrepreneurs must focus and prepare to a level not demanded in any other industry.

1.1.1. Focus: Choosing Problems Wisely

In entrepreneurship, disruption is glamorous. To be the one who thought outside the box and executed at such massive scale that the whole landscape shifted. But before taking on the health industry, one needs to step back and assess the priority of the target. Is it even worth disrupting?

Industry outsiders most likely lack sufficient insight to gauge the priority of healthcare issues. They tend to focus on a particular technology and hunt for healthcare problems to solve with it. For example, consider the recent emergence of companies seeking to force-fit Google Glass to health applications. But the exploration should be the other way around: Focus on the healthcare issue and search for its technology solution.

Unfortunately, in the absence of actual healthcare experience, the fantastic talent and passion of incoming entrepreneurs gravitates to the less important areas of this troubled industry. Having said that, the healthcare experience need not be professional training as a doctor or nurse. Even suffering a serious health issue (yourself or someone close) can thrust one deep enough into the care delivery labyrinth to clearly sense its priorities.

The entrepreneurial spirit behind all ideas, irrespective of their importance, is admirable. It takes courage to follow one’s heart and withstand criticism from others. Surely most (if not all) health-related startups have motivated, well-intentioned individuals behind them. It’s also true that most startups pivot direction multiple times to ultimately reach a viable and worthy cause, so initial focus is not necessarily the final one.

But good intentions can’t serve as justification for unfettered and ineffectual attempts at reimagining healthcare. The current mess consumes more than 17% of our GDP, and there is an urgent need to course-correct it. Our shared society bears the time and expense of incubating talented individuals with the ability to change the status quo. We should all be concerned with the opportunity costs of which issues those innovators tackle first.

Unless they have strong domain expertise and previous experience, most investors indulge only in the areas of the healthcare industry they can understand. This rules out the complex, entrenched areas which desperately need innovation and rethinking. Media tends to publicize anything that sounds exciting, irrespective of its merits. The result is a lot of noise, misconception, and misalignment about health innovation. Underneath it all, we continue to have a stolid health industry that is fundamentally infantile in technology uptake. Most of the corporate new-effort bandwidth goes into conventional areas like billing and reimbursement, because those applications are the easiest to comprehend and monetize.

We need stellar startups that reinvent the truly problematic aspects of healthcare. The medical-grade problems that affect the daily lives of the patients who utilize hospitals and clinic services, and the providers who care for them. For example:

- Health records with intuitive user interfaces that digest and beautifully display the impending avalanche of omics data. Publishing and sharing health records should be as easy as blogging on WordPress or contributing to a Wiki.

- Domain-specific Decision Support Systems that can be added to existing systems, like browser extensions added to a web browser. A marketplace (like iTunes) to distribute such solutions.

- Personal Health Records with true zero-effort adoption and complete patient ownership. These should work well on mobile, share easily, and update automatically.

- Consumer-centric apps that help prepare patients for major clinical interactions like surgery, by providing educational content, virtual tours, and checklists.

- Artificial Intelligence systems that help providers prioritize the incoming data streams (emails, lab results, referrals) in accordance with the urgency and complexity of the case.

Not all is lost. There are a handful of startups that have gone beyond concept arbitrage to tackle worthy issues. Simplee is deciphering cryptic medical bills. KitCheck is making drug inventory management more modern. HiOscar is a modern, technology-based health insurance company. Flatiron is organizing cancer data and rethinking oncology care. Omada Health is creating a platform for preventing and managing chronic diseases. One Medical is creating a modern primary care experience.

As J.K. Rowling has written, It is our choices, that show what we truly are, far more than our abilities. Superior technological abilities don’t mean much if one chooses to work on the insignificant, and appreciate the unimportant.

1.1.2. Prepare: Knowing Beforehand

Tech innovators like to describe healthcare as a pitiful cesspool of orthodox people and organizations with their heads stuck in the sand. Strict hierarchies, twisted politics, change resistance, tech ludditism: Pick any mangled aspect of doing business in health and you can easily find supporting evidence and a litany of personal anecdotes from those who have worked in the space.

But the vast majority of individuals working in the healthcare industry didn’t intend for it to be this way. There is plenty of healthcare talent and vision that constantly tries to course-correct. Aspiring health entrepreneurs need to learn about what goes on in the trenches of the actual system before embarking on an expedition to reinvent it. Without that preparation, there is a significant risk that the only thing they will change is their own mind about the merits of pursuing healthcare disruption.

The transformative power of technology is celebrated in spaces like social networking (think Facebook), communication (Apple), transportation (Uber), and lodging (Airbnb). But using that power as an excuse to not learn the fundamentals of an industry is a bit foolhardy. Failure to understand the incumbent forces in healthcare is probably the biggest reason startups fail to gain traction. In order to transform healthcare, one must work with the system.

This brings me to the reason for writing this book.

My goal was to write a simple guide for the brave individuals who have decided to venture into the frigid waters of healthcare. I truly believe that if the smart people who want to disrupt healthcare learn about the industry’s existing state, they can calibrate their vision and execute better.

This book is based on facts, anecdotes and insights gathered during my adventures with health technology. Having had the good fortune to see the space from the perspective of vendors, providers, insurers and startups, I can show readers the landscape from a high vantage point.

Readers who can benefit from this book include anyone:

- Interested in creating (or investing in) a health information technology offering

- Mostly unaware of the inner workings of the industry (that is, an outsider)

- With a previous or current background as an engineer, product person, investor or entrepreneur

If you want to understand the big picture of healthcare information technology market, this book is for you.

1.1.3. Caveats

In writing this book, I assumed that intelligent individuals only need high-level directional guidance when learning about complex spaces. The necessary details are easier to find when the problem space’s foundations are clear. That is why this book takes the macro-view throughout, deliberately avoiding the nitty-gritty and giving only select examples. If you want comprehensive lists and exhaustive details, you’ll surely be disappointed.

The opinions and conclusions expressed in this book are solely mine. I dislike cliché consulting-grade answers like It depends or Yes and No. Hence, I’ve chosen to take a stand on polarizing topics, even if that means risking neutrality or political correctness.

The content is exclusively written from a North American market perspective. Because the healthcare market changes so quickly, any book begins to grow obsolete from the moment it is published. Some of the companies mentioned as examples may not exist by the time you read this, or they may have pivoted directions. If nothing else, this volatility gives me hope for a second edition of this book.

Like all mortals with an opinion and the capacity to click on a keyboard, I’m vulnerable to errors. If you find something that is factually incorrect or constitutes copyright infringement, please reach out to me directly.

1.2. Unavoidable Jargon

It’s not humanly possible to turn the dull, complicated morass of healthcare into a thrilling read. I imagine you, the reader, to be a passionate do-it-yourself person who is eager to learn more about healthcare and its relationship with technology. Perhaps your motivation will transcend the inevitable trickle of acronyms and complex details. To assist you along the way, a short list of the peculiar syntax used throughout this book follows.

Let’s begin with the basics. Aside from patients, there are three other key constituents in healthcare:

1. Providers: Those who give care. Physicians, nurses, and almost any other licensed clinical professional you can think of. Synonym: clinicians.

2. Payers: Those who foot the bill for care. Health insurance companies, essentially. Sometimes patients pay for themselves, but that scenario is excluded here. Payers always refers to insurance companies. Synonym: insurers.

3. Policymakers: Those who make the rules relevant to care. This theoretically includes our elected representatives, but usually refers to the government agencies like CMS (Center for Medicare and Medicaid Services) which are responsible for health policy and programs.

Other terms that you may encounter regularly in this book:

- Inpatient: Refers to hospitals and similar facilities where a formal admission is required and stays last longer than 24 hours.

- Outpatient: Refers to clinic-like settings. Compared to Inpatient facilities, they provide shorter visits (less than 24 hours), treat simpler conditions, and generally cost less.

- Health Organization: An overarching term that encompasses both inpatient and outpatient facilities. It basically means a place where clinical professionals work to deliver healthcare services. Insurance companies are excluded. Synonyms: Care Delivery Organization (CDO), Health Delivery Organization (HDO).

- Health System: A vertically integrated health organization that provides all care services within its own network. For example, Kaiser Permanente, Dignity Health, Intermountain Healthcare, and Banner Health. Synonyms: Integrated Delivery System (IDS), Integrated Delivery Networks (IDN).

- ACA: The Affordable Care Act. It was signed into law in March 2010, and is discussed further in section 2.4. Policy. Synonyms: Patient Protection and Affordable Care Act (PPACA), Obamacare.

- ACO: Accountable Care Organization, a new format for health organizations promoted by the ACA. Discussed throughout section 2.4. Policy and section 4. Health Information Exchanges.

- EHR: See section 3. Electronic Health Records. Synonyms: Electronic Medical Records (EMR), Electronic Patient Records.

- PHR: See section 3.6. Personal Health Records.

- HIE: See section 4. Health Information Exchanges.

- HHS: Department of Health and Human Services. The U.S. government office overseeing all federal regulations and programming for enhancing and protecting the health and well-being of all Americans. Nearly 80,000 employees and over 1.1 trillion dollars in authorized budget for 2016.

- CMS: Centers for Medicare and Medicaid Services. The part of HHS that oversees the federal Medicare program and works in partnership with state governments to administer other social healthcare programs like Medicaid. Roughly 4,000 employees and uses more than 90% of the HHS budget.

- ONC: Office of the National Coordinator for Health Information Technology. The part of HHS that leads all Health IT efforts, including grants, policies, and standards. Around 200 employees and a $90 million budget for 2016.

- MU: Meaningful Use. The financial incentive program started by CMS to promote adoption of certified EHR technology, under direction of the American Recovery and Reinvestment Act (Stimulus Act) of 2009. Explained more in section 2.4. Policy.

- CPOE: See section 3.4 Computerized Provider Order Entry. Synonyms: Order Entry, Computerized Physician Order Entry.

- PCP: Primary Care Provider. Synonyms: Primary Care Physician, Family Physician, General Practitioner.

- Epic: One of the major Electronic Health Record vendors. www.Epic.com.

- Cerner: Another major Electronic Health Record vendor. www.Cerner.com.

2. THE LANDSCAPE

2.1. Health and Technology

Health and technology have crossed paths many times, and in many ways. Today, there are several terms used to define the multiple spaces emerging from their overlap. While sometimes nebulous, these terms do have the power to conjure visions and create communities. So it’s worth spending a minute on the key ones to weigh their validity.

Health Tech

Those in the venture capital community have long used Health Tech